Report Overview This is the sixth Sustainability Report issued by LG Electronics. It is our sincere intention to openly share our sustainability efforts and performance in 2011 with all stake- holders and initiate meaningful communication on this important issue. Special Features of This Report Key Progress and Performance · To clearly illustrate LG Electronics’ sustainability performance to our stake- holders, we have featured “Key Progress and Performance” in this report. Based on a Materiality Analysis, we have identified key sustainability management issues and illustrated opportunities and risk factors, mid to long term goals and progress, and future goals and direction related to those issues. We will also con- tinue to utilize those issues as the key indicators for our sustainability management performance. Special Issue · LG Electronics, which was named as one of the World's 100 Most Innovative Companies in 2011 by a world-leading business intelligence provider Thomson and Reuters, is expanding its capabilities into water solutions and establishing it as a future growth engine, as we continue our efforts into R&D as well. “Special Issue” illustrates how LG Electronics is preparing itself for the future and striving for sustain- able growth. Additionally, it highlights the progress we have made to date. Reporting Principles This report was prepared in accordance with the G3.1 guidelines of the Global Reporting Initiative (GRI) and the Accountability Principles Standard (AA1000APS). Based on a Materiality Analysis, priority was given to issues and information relevant to both LG Electronics and our stakeholders in preparing this report. Infor- mation about the key issues are organized and presented in a consistent format comprised of three parts – “Our Approach”, “Our Performance” and “Future Direction”, to provide greater clarity and structure. Reporting Preparation and Process In preparation of this report, we conducted a preliminary survey of internal and external stakeholders to analyze materiality and improve the report structure. The result was reported to management and briefed to the CSR Council comprised of staff members from relevant departments. Articles prepared by each depart- ment were finalized after a review by management and a third party assurer. Reporting Period and Scope This report was prepared based on data for the period from January 1 to December 31, 2011. For quantita- tive measures of performance, some data for the first half of 2012 was included as well. This covers all LGE business sites in Korea and overseas. Standard currency for this report is the Korean won (KRW), with an average exchange rate of 1,108.11 KRW against the USD in 2011 (first quote of the day, selling rate). The exchange rate in effect on December 31, 2011 was USD 1 = KRW 1,159.00. Assurance To ensure credibility, this report has received a third party assurance from the Korea Productivity Center, which provides independent external assurance for corporate sustainability reports. The assurance state- ment is on pages 83-84. Information sources concerning LG Electronics’ sustainability management efforts Striving for Sustainability based on the LG Way With the LG Way (Customer-Value Creation, People-Oriented management, Jeong-Do Management) as its LG Electronics Website Environmental Report guiding principle, LG Electron- (http://www.lg.com/sustainability) ics is adhering to the basics of management and seeking Contact Information mutually sustainable growth CSR Team, LG Electronics, LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul, 157-721, Korea with stakeholders. Email: [email protected] Tel: 82-2-3777-3268 CONTENTS Report overview 2 Key Progress and Performance 4-5 CEO Message 6-7 Top Management Messages 8 Overview Management Philosophy 9 Corporate Overview 10-13 and Economic Performance CSR Management 14-15 R&D 16-17 Special Issue Water Solutions 18-19 Stakeholder Engagement 20 Stakeholder Stakeholder Consultation on CSR 21-22 Communication Materiality Analysis 23-25 Customer 26 Communication with Customers 27-29 Product Quality and Safety 30-31 Consumer Satisfaction 32-33 and After-Sales Service Environment 34 Greener Products 35-41 Low-Carbon Green Management 42-46 EESH Management 47-49 Materiality Business Partner 50 Report Win-Win Growth 51 CSR in Supply Chain 52-54 Conflict Minerals 55 Community 56 Social Contribution 57-61 Employee 62 Corporate Culture/Work-Life Balance 63-64 Talent Management 65-67 Fair Evaluation and Rewards 68 Labor Rights Protection 69-71 Corporate Governance 73 Compliance Risk Management 74 Management Jeong-Do Management 75 Report Fair Trade 76 Information Security and Privacy Protection 77 Economic Data 78 Our Data Social Data 79 Environmental Data 80-82 Independent Assurance Statement 83-84 Appendix Memberships/Awards & Recognition 85 GRI/UNGC Index 86-88 4·2 011 -2012 LG Electronics Sustainability Report Key Progress and Performance Key CSR Issue Mid to Long Term Objective Product Quality and Safety • Achieve the “World's Best Product Safety” within three years (by 2013) Greener Products • Expand greener products • Improve product energy efficiency • Increase the use of recycled materials and reinforce E-waste management system Low-Carbon Green Management • Meet the reduction targets for GHG emissions associated with production and product use - Production: Reduce 150,000 tons by 2020 from the base year 2008 - Product use: Reduce 30 million tons by 2020 compared to the total energy consumption in 2007 • Expand green businesses • Expand GHG management throughout the value chain EESH Management • Establish a management system for suppliers’ manufacturing processes with high environmental impacts by 2013 • Improve the overseas EESH management level to over 90% level of Korea by 2013 CSR in Supply Chain • Implement the risk management system based on the Electronic Industry Citizenship Coalition (EICC) standards - Conduct regular risk assessment and make corrective actions - Conduct an audit on 25% of high-risk suppliers • Establish a tracking system for regulations on conflict minerals Social Contribution • Contribute to achieve the UN Millennium Development Goal 1 (Eradicate extreme poverty & hunger) and Goal 7 (Ensure environmental sustainability) by 2015 Corporate Culture/Work-Life Balance • Improve overall employees’ awareness of the LG Way (Overseas awareness is 89% compared to Korea’s index) Labor Rights Protection • Bring the risk level down to low at all production sites (100%) by 2014 (based on the EICC standard) • Strengthen internal regulations up to the EICC standard Overview | Key Progress and Performance·5 Major Achievement in 2011 Future Direction • Strengthened quality management • Raise employee awareness on product safety and establish - Implemented the “Quality Penalty”system accountability - Conducted a corporate wide Product Liability Audit by HQ • Create a corporate culture that puts product safety as the first priority • Recognized for “Excellence in Life Safety Achievements” in 2011 • Plan to establish an internal testing center exceeding the global • Received the Presidential Award in Standardization on World Standard standards Day 2011 • Acquired the “Energy Star Most Efficient” Certification • Continually strengthen the standards for greener products (Eight TV, two refrigerator and three washing machine models) • Reduce GHG emissions associated with product use by improving • Carbon Label: Korean Carbon Footprint Label, Carbon Trust, product energy efficiency Carbon Free • Increase and improve disclosure of product carbon footprint • Selected as “The Most Water Efficient Product” from the U.K.’s information Waterwise (Drum washing machine and dishwasher) • Increase E-waste recycling • Received the Presidential Prize at the 2011 Global Green Management Excellence Awards (TROMM Washing Machine) • Collected a total of 188,264 tons of E-waste (Korea, Japan, Europe and U.S.) • Reduced 102,000 tons of GHG emissions associated with production • Expand and reinforce GHG reduction efforts to meet the mid to compared to 2008 long term targets • Contributed to reduce 21 million tons of GHG emissions associated • Reinforce green businesses (photovoltaics, LED, etc.) with product use based on the total energy consumption in 2007 • Expand support for suppliers’ GHG reduction efforts • Developed and strengthened green businesses such as photovoltaics, LED lighting, smart grid, water solutions, etc. • Selected as the Carbon Management Global Leaders Club (Three consecutive years) • Strengthened the support system for overseas production • Improve the management and operation quality of the integrated subsidiaries’ EESH management EESH system • Established the audit system and fostered EESH auditors • Provide continual support to overseas subsidiaries and suppliers for • Acquired Korea’s first Green Management System Certification improving their EESH management capability • Included CSR requirements into Master Purchase Agreement • Expand the number of suppliers in CSR Risk Program • Provided CSR training for 152 suppliers • Increase certified conflict-free smelters within the supply chain • Conducted risk assessment for 213 suppliers • Performed onsite consulting for 17 suppliers • Conducted a survey on suppliers about the use of conflict minerals • Expanded social contributions to underdeveloped countries • Make social contributions utilizing our products and technology (Africa and Asia) • Increase volunteer activities for local communities at a subsidiary level